[bouldercouncilhotline] Hotline: Medical Marijuana Questions

[cmosupport at bouldercolorado.gov]

Sender: Kathy Haddock

In response to Councilmember Jones’ questions:

1)	In general, are the standards being recommended for the medical marijuana industry similar to standards for other industries in the city?  Yes, the standards are the same as for other industries that require permits or licenses from the city. However, MMB businesses, especially Grows and MIPs, do present special challenges and the need for specialized building improvements in excess of normal requirements for electrical, ventilation, and chemical handling due to their operational characteristics.

a.	Do city license fees for other businesses generally cover the City’s full administration costs (i.e., aren’t subsidized by the General Fund)? Generally, fees are charged for licenses or permits to cover the costs to the city that the specific type of license or permit takes in staff time.  The exception is liquor license for which the state caps the fees the city can charge which is lower than the staff costs to process the license applications (fees cover about 75% of the city’s staff costs).  However, in addition to sales taxes, there is also an occupation tax collected on liquor licenses that adds about $600,000 per year. 
 
b. When looking at other businesses, do we look ever look at net proceeds to the City (i.e., administration costs minus sales/use tax) or is it standard practice to just look at administration costs separate from any other income to the City?  It is standard practice to look at the cost of providing services to individuals or businesses that are not shared by the community.  Most often this arises in the case of a person applying for a license or permit from the city.  Examples include building and other land use permits, park fees, and license applications.  It is not standard practice to offset direct costs for a permit or license by the taxes generated by the industry.   In the case of medical marijuana and other licenses and permits, the fees cover the cost to license a business or issue a permit; the staff time needed to process an application would not be spent but for the individual application. The fees do not cover the street maintenance, law enforcement, and other general government services used by the licensed business or permitted uses. 
  
2)	Regarding cultivation facilities:
a.     How many located in Boulder are not associated with a Boulder dispensary  (i.e., how extensive an issue is the use tax issue)?  9 of the 27 licensed wellness center dispensaries have grows outside of Boulder.  Ten of the 34 licensed grows have their retail dispensaries outside of Boulder.

b.     Are there other examples of businesses in the city that pay only use tax? Any business that does not have retail sales within the city limits of Boulder, such as service providers or manufacturing.

c.      If we decided to require cultivation facilities to be associated with a dispensary in Boulder, would we need to grandfather in existing facilities even if we changed requirements for new facilities? When the city adopts new requirements, it is most common for the law to apply in the future rather than retroactively.  When it is a use that is intended to be phased out, time is usually given for that to happen.  That has been our standard practice in the past. If we do not do that with this amendment, I would suggest a phase in period for the law change to allow businesses to make other plans over the course of 1 to 2 years.

3)	The memo says that use of industrial land in Boulder by cultivation facilities is less than was originally thought and is not really a pressing issue. I am curious how much industrial space is actually taken up by medical marijuana industry in Boulder? At what level would the issue be considered a problem? We are researching the answer to this question.

4)	 How big of an issue is odor from legal facilities? (Or is it mostly from illegal ones?)  Most of the complaints come from neighboring residences and businesses about once every two months.  It was much more common in the beginning, and now complaints are rarer as businesses have complied.  Licensed MMBs in the city have an incentive to work to eliminate the odors since it is a requirement of its license, and the odor issues tend to be resolved when the city issues a Notice of Violation to the MMB.  For the complaints related to grows in enclaves of the city, the city does not have jurisdiction to require those businesses take responsibility for the odors caused.  There is one area of the city where that situation exists.  

5)	 What are the positive/negative implications for Boulder of neighboring communities’ bans? It depends on people's perspective- the fact that we are one of only a few communities that have not banned, and the recent bans after licensing by Ft. Collins and Longmont, creates a gold rush to Boulder for both grows that don't pay sales tax and for dispensaries that pay some (although licensees have said that all available spots for new dispensaries, given allowable zoning and the prohibition of no more than three within 500 feet of each other, are full).  The negative part is that new applications, which are the licenses that result from those that want to relocate to Boulder from other communities that have banned, take much more customer service, review, and inspection time, than renewals of already licensed Boulder businesses.

6)	Regarding proposed fee increases, do we expect the City’s costs to decrease once the industry is stabilized? If the City’s costs increase/decrease, would we increase/decrease licensing fees accordingly in the future? We look at license fees each year at budget time to see if they need to be adjusted as to whether we are at a breakeven point or not. We don't need to make money but we don't want to lose money for the city. City departments, such as licensing, planning, fire, CAO, and BPD, will need to go through the same process that we went through this year to see if the licensing fees collected defray all of the review and inspection costs and time spent. If we keep on having an influx of new, change of locations (often due to federal letters), transfers of ownership and permanent modification applications, then the fees may still go up. If we have fewer of the complex applications aforementioned and just are doing renewal applications, then the costs are likely to go down.

7)	Do we expect the issue of the state’s Medical Marijuana Enforcement Division to come up again in this state legislature? Should increasing state staff be included in our Legislative Agenda?  We do expect the issue of funding the state’s MMED to be  before the legislature in 2013.  The state’s laws are focused on tracking marijuana from “seed to sale” and statewide compliance.  Having the state’s Medical Marijuana Enforcement Division fully funded would help in making sure MMBs in Boulder are compliant with those aspects of the law.  However, we do not see that it would significantly reduce the work of city staff, particularly since the state law requires the local government to issue a license before the state application is considered.  

The state laws are not being enforced currently because the state’s MMED has such few staff.  We do not know the likely impact to Boulder’s MMBs if the  MMED had more staff.  Therefore we are reluctant to make a recommendation as to whether support for increased staffing should be part of the city’s Legislative Agenda.  However, if Amendment 64 passes and City Council determines to allow recreational marijuana in the city (which requires business licenses from the city), there would be a significant impact on staff.  The need for recreational marijuana to be addressed in the Legislative Agenda in those circumstances would need to be evaluated.